MYL looks rather weak. We can see that the $52 resistance attracted sellers. I will probably close the trade if we break below the rising price trend.
On the short side, CPWR is still very weak.
All in all, the risk pattern of the portfolio is still acceptable. None of these trades presents any kind of risk.
I would like to take some time today to review the stock selection process.
The first step is to automatically scan the database of the daily stock picks that are shown in the daily picks section linked below.
http://www.effectivevolume.com/conte...k-Pick-Section
Please note that the stock picks section selected SWFT on June 24. That was somewhat early.
I also scan the stocks from the two filters below, from which I hand pick those with a "nice-looking" pattern.
http://www.effectivevolume.com/content.php?1958
http://www.effectivevolume.com/content.php?1959
I then enter these stocks in my probability calculation tool, using the 5MA with a 2.5% envelope. (5MA +/- 2.5%.)
For long ideas, I come up with a list that can be seen below. On that list, I highlighted two stocks that are very strong: LLY and WU.
Let's look at WU. We can see below that WU shows a parabolic EV pattern, but the stock is extended at the top of its envelope. The probability calculation shows that there is almost no chance of reaching the buy zone on Monday. Of course, this does not mean that WU is not a good stock to buy. It means that it will likely not pull back down to our buy zone.
From the above list, I would eliminate all the stocks with a less than 10% probability of pulling back to their buy zone. This leaves us with the table below. This list is much easier to manage. Let's not forget that we already have 4 positions. However, MYL could be closed on Monday, which means that we would maybe need to enter two new positions. TBT is also by definition a dull trade and could be exited for a better opportunity.
Let's review these positions one by one and look at what might interest us.
LONG TRADES
In general, for Long trades, I like stocks that are above their 50MA, in a stable Supply zone and that are pulling back to support while not attracting sellers.
We will start the review from the bottom of the Table.
IAG and BTG are two gold miners. I am not really interested in them for two reasons. The first one is that they are priced under $10, which means that the lowest spread between the bid and the ask ($0.01 but in reality it is $0.0149) is large relative to the nominal price. The second reason is that most gold miners have a high correlation and if I want to take a position in the sector, I feel that it is safer to buy GDX than any of the miners.
RDC (driller) is interesting as a buy candidate, because it bounced two days ago at its 50MA. I would buy a pull-back to the 50MA.
QCOR is a real leader. It is a biotech company that has been in a consolidation phase for a few weeks, but with a slightly increasing EV pattern. I would buy a pull-back to 90, with a stop below the trading range. If you prefer a break-out, then you need to place a buy order just above the trading range.
What is interesting with QCOR is that the float turns in 29 days. This means that it is a popular stock. If we close MYL, QCOR is certainly a good replacement candidate.
ENS is a batteries manufacturer for industrial applications (power units.) We can see that the stock is just above the 50/200MA. Buying at the 50MA could work, with a stop below the 200MA. The EV pattern is a little weak, but it is in a stable supply zone.
MLNX is a semiconductor design company. Even if the EV pattern looks good, the stock has been in a long down trend and has met a lot of resistance at the 200MA. This indicates that the upside is limited. A logical stop is also rather low and would force us to only take half a position. That would probably be dead money and hence, better not think about this trade.
SPW is an industrial machinery producer. We can see that the stock is at support, with LEV indicating much buying. I however believe that most of this buying could be due to the Russell re-balancing. Buying around $106 with a stop below the 50MA could be an interesting trade.
ALXN is a pharmaceutical company. It offers a pattern similar to SPW, but the downtrend seems more pronounced and the stock broke below the 50MA. I'll pass for now.
BBG is an oil exploration company. The stock is pulling back just at the buy zone and a stop at the Neutral Boundary, just below the 200/50MA, should limit our risk.
SHORT TRADES
For short trades, I like broken stocks that are coming back to resistance on weak LEV and possibly with a high supply of shares.
For Monday, I only have SWI and CYOU as good candidates.
- AFOP is at support. It is a short on a break below 17
- FBHS is close to the 50MA and might break above. Sellers are present but not very active. FBHS will probably just follow the market trend.
- PVH displays a positive LEV pattern. Not a good short candidate.
- KORS is just above support. It is a short if it breaks below the 200MA.
AFOP
FBHS
PVH
KORS
SWI
SWI is interesting. We can see that the stock broke and is now pulling back to resistance on a weak EV pattern. This is a "text book" short trade. We can use a stop just above the 50/200MA.
CYOU is also "textbook short", but with the extra advantage that it is a Chinese stock, with all the negativity that goes with it. One problem is the low volume, which makes shorting somewhat more risky than usual.
